chapter introduction & overview 1. mcgraw-hill/irwin international business, 5/e © 2005 the...
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Chapter
INTRODUCTION&
OVERVIEW
1
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-2
Case: Wal-mart’s global expansion
Largest retailer in the world –Over 4500 stores International expansion in 1991begins with Mexico
in response to market saturation in the US Localization strategy adopted after trial and error
Global buying power has allowed it to reap economies of scale
Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-3
What is globalization?
The shift towards a more integrated and interdependent world economy
Two components: The globalization of markets The globalization of production
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-4
Globalization of markets
The merging of distinctly separate national markets into a global marketplace Tastes and preferences converge onto a global
norm Firms offer standardized products worldwide
creating a world market
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-5
Globalization of markets
Significant differences still exist between national markets on many relevant dimensions
These differences require that marketing and operating strategies and product features be customized to best match conditions in a country.
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-6
Globalization of markets
Countries are different Range of problems are wider and more
complex Government intervention in trade and
investment creates problems International investment is impacted by
different currencies
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-7
Globalization of production
Refers to sourcing of goods and services from locations around the world to take advantage of Differences in cost or quality of the factors of
productionLaborLandCapital
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-8
Swan Optical Manufacturing
1-5
Design
Global Production
Example 1
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-9
Volume of world trade and production, 1950-2002
Fig: 1.1
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-10
Emergence of global institutions
Globalization has created the need for institutions to help manage, regulate and police the global marketplace GATT WTO IMF World bank United Nations
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-11
Global drivers
Macro factors that underlie trend towards greater globalization
Decline in trade barriers Technological change
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-12
Pattern of declining tariffs
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-13
Declining barriers to trade
Globalization of markets and production has been facilitated by Reduction in trade barriers Removal of restrictions to foreign direct
investment
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-14
The changing pattern of world output and trade
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-15
Percentage share of total FDI stock
Fig: 1.3
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-16
Volume of FDI inflows, 1994-2002 ($ billions)
Fig: 1.4
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-17
The role of technological change
Microprocessors and telecommunications
The internet and world wide web
Transportation technology
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-18
The shrinking globe
Fig: 1.2
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-19
Changing demographics of the world economy
World output and trade Changing foreign direct investment Changing nature of multinationals
Mini multinationals Non US multinationals
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-20
National origin of largest multinational corporations
Fig: 1.5
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-21
Globalization debate-Pro
Lower prices for goods and services Economic growth stimulation Increase in consumer income Creates jobs Countries specialize in production of goods
and services that are produced most efficiently
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-22
Environmental performance and income
Fig 1.6
McGraw-Hill/IrwinInternational Business, 5/e
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
1-23
Globalization debate-Con
Destroys manufacturing jobs in wealthy, advanced countries
Wage rates of unskilled workers in advanced countries declines
Companies move to countries with fewer labor and environment regulations
Loss of sovereignty